ITO, CHENNAI v. Sri Durga Das Vyas, CHENNAI

ITA 1316/CHNY/2009 | 2003-2004
Pronouncement Date: 14-11-2011 | Result: Allowed

Appeal Details

RSA Number 131621714 RSA 2009
Assessee PAN ABVPV4706G
Bench Chennai
Appeal Number ITA 1316/CHNY/2009
Duration Of Justice 2 year(s) 2 month(s) 27 day(s)
Appellant ITO, CHENNAI
Respondent Sri Durga Das Vyas, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 14-11-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted A
Tribunal Order Date 14-11-2011
Date Of Final Hearing 09-11-2011
Next Hearing Date 09-11-2011
Assessment Year 2003-2004
Appeal Filed On 18-08-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI BEFORE DR. O. K. NARAYANAN VICE PRESIDENT AND SHRI GEORGE MATHAN JUDICIAL MEMBER I.T.A. NOS. 1140 & 1141/MDS/2009 ASSESSMENT YEARS : 2001-02 & 2002-03 THE INCOME-TAX OFFICER WARD-IX(1) CHENNAI. V. SHRI D. SRINIVAS VYAS PROP. M/S. PUSHPAK SALES CORPORATION NO. 13 ERRABALU CHETTY STREET CHENNAI-600 001. [PAN: ABVPV4706G] A N D I.T.A. NOS. 1311 1312 1313 1314 1315 & 1316/MDS /2009 ASSESSMENT YEARS : 1998-99 1999-2000 2000-01 2001-02 2002-03 & 2003-0 4 THE INCOME-TAX OFFICER V. SHRI DURGA D AS VYAS WARD-IX(3) PROP. M/S. PUSHPAK SALES CHENNAI. CORPORATION NO. 13 ERRABALU CHETTY STREET CHENNAI-600 001. [PAN: ADAPV2591C] (APPELLANTS) (RESPONDENTS) APPELLANTS BY : SHRI SHAJI P. JACOB SR.DR RESPONDENT BY : SHRI K. S. RAGUNATHAN CA I.T.A. NOS.1140 1141 & 1311-1316/MDS/2009 2 DATE OF HEARING : 09-11-2011 DATE OF PRONOUNCEMENT : 14-11-2011 O R D E R PER BENCH : ITA NOS. 1140 & 1141/MDS/2009 ARE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-IX CHENNAI I N ITA NO. 126 & 125/08-09 DATED 31-03-2009 FOR THE ASSESSMENT YEARS 2001-02 A ND 2002-03 IN THE CASE OF SHRI D. SRINIVAS VYAS. ITA NOS. 1311 TO 1316/MDS/2 009 ARE APPEALS FILED BY THE REVENUE AGAINST THE ORDER IN ITA NOS. 08 TO 13/09-1 0 DATED 29-05-2009 FOR THE ASSESSMENT YEARS 1998-99 TO 2003-04 IN THE CASE OF SHRI DURGA DAS VYAS. AS THE ISSUES IN ALL THE EIGHT APPEALS ARE INTER-CONNECTED AND RELATED ALL THE EIGHT APPEALS ARE DISPOSED OF BY THIS COMMON ORDER. 2. SHRI SHAJI P. JACOB LEARNED SR. DR REPRESENTED ON BEHALF OF THE REVENUE AND SHRI K. S. RAGUNATHAN CA REPRESENTED ON BEHALF OF THE ASSESSEES. 3. IT WAS SUBMITTED BY THE LEARNED DR THAT THE ASSE SSEES ARE INDIVIDUALS WHO ARE DOING COMMISSION AGENCY BUSINESS. IT WAS THE S UBMISSION THAT THE ASSESSEES WERE RECEIVING COMMISSION FROM ONE M/S. SIEMENS LTD . APART FROM OTHERS. IT WAS THE SUBMISSION THAT THE ASSESSEES HAD FILED THEIR R ETURNS OF INCOME WHEREIN THEY HAD OFFERED THE COMMISSION RECEIVED AND HAD CLAIMED EXPENSES IN CONNECTION WITH I.T.A. NOS.1140 1141 & 1311-1316/MDS/2009 3 THE BUSINESS. THERE WAS A SURVEY ON THE PREMISES O F THE ASSESSEES ON 29-12-2003 AND IN THE COURSE OF SURVEY IT WAS FOUND THAT THE A SSESSEES HAD NO INFRASTRUCTURE EXPERIENCE OF TECHNICAL OR PROFESSIONAL EXPERTISE T O UNDERTAKE THE SERVICES TO EARN HUGE COMMISSION FROM M/S. SIEMENS LTD. AND OTHERS. CONSEQUENTLY THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT HAD CALLED UPON THE ASSESSEES TO EXPLAIN THE NATURE OF THE EXPENDITURE. THE ASSESSEES WERE UNAB LE TO EXPLAIN THE EXPENDITURE. CONSEQUENTLY THE ASSESSING OFFICER HAD DISALLOWED THE COMMISSION PAID BY THE ASSESSEES TO THEIR SUB-CONTRACTORS BY HOLDING THE S AME AS PAYMENT NOT FOR BUSINESS PURPOSES. THE ASSESSMENTS IN THE CASE OF SHRI DURG A DAS VYAS WERE COMPLETED ON PROTECTIVE BASIS AND IN THE CASE OF SHRI D. SRINIVA S VYAS THE ASSESSMENTS WERE COMPLETED ON SUBSTANTIVE BASIS. IN THE MEANTIME M /S. SIEMENS LTD. HAD FILED PETITION BEFORE THE HON'BLE SETTLEMENT COMMISSION W HEREIN IT HAD ADMITTED THAT IT WAS NOT ABLE TO SUBSTANTIATE THE PURPOSES FOR WHICH THE COMMISSION WAS PAID AND HAD CONSEQUENTLY OFFERED THE SAME TO TAX. THE APPL ICATION BEFORE THE HON'BLE SETTLEMENT COMMISSION WAS FILED ON 25-02-2004 AND T HE HON'BLE SETTLEMENT COMMISSION HAD PASSED ITS ORDER ON 07-01-2008 WHERE IN THE OFFER OF THE COMMISSION WITHDRAWN WAS ACCEPTED. THE OFFER BEFOR E THE HON'BLE SETTLEMENT COMMISSION INCLUDED THE COMMISSION PAID TO BOTH THE ASSESSEES HEREIN. THE DISCUSSION IN REGARD TO THE COMMISSION PAID TO THE TWO ASSESSEES IS FOUND IN PAGE 5 OF THE ORDER OF THE HON'BLE SETTLEMENT COMMISSION V IDE PARA 2.3.1. AS A CONSEQUENCE OF THE OFFER MADE BEFORE THE HON'BLE SE TTLEMENT COMMISSION THE I.T.A. NOS.1140 1141 & 1311-1316/MDS/2009 4 HON'BLE SETTLEMENT COMMISSION HAD VIDE ORDER DATED 30-12-2005 DIRECTED FURTHER INVESTIGATION TO INVESTIGATE THE PAYMENTS OF COMMIS SION SHOWN TO HAVE BEEN PAID WERE BOGUS OR WERE SIMPLY NOT SUSTAINABLE AS ALSO O THER ISSUES. BEFORE THE SETTLEMENT COMMISSION THE COMMISSIONER OF INCOME T AX HAD CLARIFIED IN HIS REPORT DATED 14-06-2007 THAT M/S. SIEMENS LTD. WAS FOLLOWI NG A PARTICULAR MODUS OPERANDI WHEREBY IN SOME CASES M/S. SIEMENS LTD. ISSUED CHEQ UES TO VARIOUS PARTIES WHO HAD NOT RENDERED ANY SERVICE BUT HAD DEPOSITED IN T HEIR ACCOUNTS AND CASH WAS GIVEN TO M/S. SIEMENS AFTER DEDUCTING COMMISSION OF 2.5%. THREE ENTITIES HAD ADMITTED SUCH MODUS OPERANDI . THE TWO ASSESSEES IN THE APPEAL BEFORE US WERE NOT IN THE THREE ENTITIES WHO HAD ADMITTED TO THE MODUS OPERANDI ABOVE. THE SECOND CATEGORY WAS PAYMENTS WHICH WERE MADE TO THE PARTIES WHOSE EXISTENCE ITSELF WAS DOUBTFUL AND SEVEN SUCH PARTIES FELL INT O THE CATEGORY. THE TWO ASSESSEES HEREIN DO NOT FALL IN THIS CATEGORY. THE THIRD CAT EGORY WAS OF PERSONS IDENTIFIABLE BUT LACKING EITHER THE KNOWLEDGE INFRASTRUCTURE OR CAPACITY TO RENDER ANY SERVICE TO M/S. SEIMENS LTD. THE IMMEDIATE WITHDRAWAL OF CASH WAS OBSERVED FROM THE RECIPIENTS ACCOUNTS AS OBSERVED IN SIX CASES OF C HENNAI. THE TWO ASSESSEES HEREIN FELL WITHIN THE THIRD CATEGORY. THUS IT WAS SUBMIT TED THAT IN THE CASES OF THE ASSESSEES HEREIN THE COMMISSION PAID BY M/S. SIEMEN S LTD. HAD BEEN OFFERED TO TAX ONLY BECAUSE THEY DID NOT HAVE STRICT PROOF OR EVID ENCE TO PROVE TO THE SATISFACTION OF THE DEPARTMENT REGARDING THE CORRECTNESS OR GENU INENESS OF THE EXPENSES. THE LEARNED DR DREW OUR ATTENTION TO PARA 2.5.1 AND 2.5 .2 OF THE ORDER OF THE HON'BLE I.T.A. NOS.1140 1141 & 1311-1316/MDS/2009 5 SETTLEMENT COMMISSION WHICH EXPLAINED THE STAND. I T WAS THE SUBMISSION THAT THE HON'BLE SETTLEMENT COMMISSION HAD ACCEPTED THE APPL ICATION MADE BY M/S. SIEMENS LTD. AND THE COMMISSION EXPENDITURE WHICH W AS OFFERED FOR DISALLOWANCE BY M/S. SIEMENS LTD. IT WAS THE SUBMISSION THAT AF TER THE ORDER OF THE HON'BLE SETTLEMENT COMMISSION THE ASSESSEE MOVED A RECTIFI CATION APPLICATION UNDER SECTION 154 OF THE INCOME TAX ACT 1961 BEFORE THE ASSESSING OFFICER IN THE CASE OF SHRI DURGA DAS VYAS ON 26-11-2008 SUBMITTING THAT T HE COMMISSION PAID TO THE ASSESSEE HAD BEEN OFFERED AS INCOME BY M/S. SIEMENS LTD. BEFORE THE HON'BLE SETTLEMENT COMMISSION AND CONSEQUENTLY THE COMMISSI ON INCOME RECEIVED WAS LIABLE TO BE DELETED. IN THE CASE OF SHRI D. SRINI VAS VYAS IT WAS THE SUBMISSION THAT IN THE COURSE OF ASSESSMENT ITSELF THE ASSESSEE HAD RAISED THE CLAIM. IT WAS THE SUBMISSION THAT IN THE CASE OF SHRI DURGA DAS VYAS THE ASSESSING OFFICER HAD REJECTED THE RECTIFICATION APPLICATION HOLDING THAT THERE WAS NO MISTAKE APPARENT FROM THE RECORD WHICH CALLED FOR ANY RECTIFICATION. IT WAS THE SUBMISSION THAT ON APPEAL BEFORE THE LEARNED CIT(A) IN THE CASE OF SHR I DURGAR DAS VYAS THE LEARNED CIT(A) HAD ACCEPTED THE CONTENTION OF THE ASSESSEE THAT CIRCULAR NO. 71 (F. NO. 246/25/71-A & PAC DATED 24-12-1971 AS ALSO CIRCULAR NO. 73 (F. NO. 245/13/71-A & PAC) DATED 07-01-1972 WOULD APPLY AND AS THE INCO ME HAS BEEN OFFERED BY M/S. SIEMENS LTD. THE PROTECTIVE ASSESSMENTS WERE LIABLE TO BE RECTIFIED AND CONSEQUENTLY DELETED THE PROTECTIVE ASSESSMENTS. I.T.A. NOS.1140 1141 & 1311-1316/MDS/2009 6 4. IN THE CASE OF SHRI D. SRINIVAS VYAS THE LEARNE D CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE THAT HE HAD PAID BACK TH E COMMISSION AFTER RETAINING 2.5% OF THE ALLEGED COMMISSION RECEIVED FROM M/S. S IEMENS LTD. IT WAS THE SUBMISSION THAT IN THE CASE OF SHRI D. SRINIVAS VYA S THE LEARNED CIT(A) WITHOUT ANY EVIDENCE SHIFTED THE ASSESSEE FROM THE THIRD CATEGO RY WHICH STOOD IN THE SETTLEMENT COMMISSION ORDER TO THE FIRST CATEGORY AND DIRECTED THE ASSESSING OFFICER TO DELETE THE WHOLE COMMISSION RETAINING ONLY 2.5% OF THE GRO SS RECEIPTS AS THE INCOME AND TO ALLOW MINIMUM EXPENSES. IT WAS THE SUBMITTED BY THE LEARNED DR THAT IN THE CASE OF SHRI DURGA DAS VYAS THE ISSUE WAS NOT AN IS SUE WHICH COULD BE CONSIDERED UNDER SECTION 154 OF THE ACT INSOFAR AS THE ASSESSE E FELL WITHIN THE THIRD CATEGORY OF THE COMMISSION PAYMENTS RECEIVED FROM M/S. SIEMENS LTD. AND THERE WAS NO EVIDENCE WHATSOEVER NOR WAS THERE A WHISPER BY M/S. SIEMENS LTD. FOR HAVING RECEIVED BACK ANY PART OF THE COMMISSION FROM THE A SSESSEE. IT WAS THE SUBMISSION THAT EVEN ASSUMING THAT THIS WAS SO THAT THE ASSESSEE DID PAY BACK ANY AMOUNT TO M/S. SIEMENS LTD. THE SAME WOULD HAVE TO BE VERIFIED AND IT CANNOT BE SAID THAT THE ISSUE WAS NOT A DEBATABLE ONE OR THAT IT WAS A MISTAKE APPARENT FROM THE RECORD WHICH COULD BE RECTIFIED BY INVOKING THE PROVISIONS OF SECTION 154 OF THE ACT. 5. IN REGARD TO THE APPEALS IN THE CASE OF SHRI D. SRINIVAS VYAS IT WAS THE SUBMISSION THAT ON MERITS THE ASSESSEE DID NOT FALL WITHIN THE FIRST CATEGORY WHERE THE MONIES HAD BEEN REVERTED BACK TO M/S. SIEMENS L TD. AND NO EVIDENCE TO THIS I.T.A. NOS.1140 1141 & 1311-1316/MDS/2009 7 EFFECT HAD BEEN PRODUCED BEFORE THE ASSESSING OFFIC ER. IT WAS THE FURTHER SUBMISSION THAT THE SURVEY HAD TAKEN PLACE ON 29-12 -2003. M/S. SIEMENS LTD. FILED SETTLEMENT APPLICATION ON 25-02-2004 AND THE ASSESS EES HAD ADEQUATE TIME TO FILE REVISED RETURNS WITHDRAWING THEIR CLAIM OF RECEIPT OF COMMISSION AND THIS WAS ALSO NOT DONE MORE SO IN THE CASE OF SHRI DURGA DAS VYA S. THE RETURN FOR THE ASSESSMENT YEAR 2003-04 HAD BEEN FILED ON 29-03-200 4 MUCH AFTER THE FILING OF THE SETTLEMENT APPLICATION BY M/S. SIEMENS LTD. AND IN THIS RETURN ALSO THE ASSESSEES HAD CONTINUED TO CLAIM THE CONTINUOUS REC EIPT FROM M/S. SIEMENS LTD. AS THEIR INCOME AND CLAIMED EXPENDITURE ON THE SAME AN D NOTHING IN REGARD TO THE REPAYMENT HAD BEEN MADE BEFORE THE ASSESSING OFFICE R EVEN IN THE COURSE OF ASSESSMENT PROCEEDINGS. IT WAS THE SUBMISSION THA T THE ORDERS OF THE LEARNED CIT(A) WERE LIABLE TO BE REVERSED. 6. IN REPLY THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE INCOME WHICH WAS OFFERED BY THE ASSESSEES HAD BEEN OFFERED BY M/S. SIEMENS LTD. BEFORE THE SETTLEMENT COMMISSION. IT WAS THE SUBMISSION T HAT IT WAS THE MODUS OPERANDI OR DEVICE BY M/S. SIEMENS LTD. BY WHICH M/S. SIEMEN S LTD. WERE USED TO PAY THE ASSESSEES AMOUNTS BY CHEQUE AND THE ASSESSEES WOULD WITHDRAW THE AMOUNTS FROM THEIR BANK ACCOUNTS AND AFTER RETAINING 2.5% RETUR N THE CASH TO M/S. SIEMENS LTD. IT WAS THE SUBMISSION THAT THE SAME INCOME SHOULD N OT BE TAXED TWICE ONCE IN THE HANDS OF M/S. SIEMENS LTD. AND AGAIN IN THE HANDS O F THE ASSESSEES. IT WAS THE SUBMISSION THAT IN THE CASE OF SHRI DURGA DAS VYAS IN VIEW OF THE CIRCULAR CITED BY I.T.A. NOS.1140 1141 & 1311-1316/MDS/2009 8 THE LEARNED CIT(A) THE PROTECTIVE ASSESSMENTS WERE LIABLE TO BE QUASHED BY INVOKING THE PROVISIONS OF SEC. 154 AS M/S. SIEMENS HAD ALREADY DISCLOSED THE COMMISSION PAYMENTS AS ITS INCOME BEFORE THE SETTLE MENT COMMISSION. HE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A ). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN TH E COURSE OF HEARING IT WAS PUT TO THE LEARNED AUTHORISED REPRESENTATIVE AS TO HOW THE ASSESSEES COULD IN APPELLATE PROCEEDINGS GET THEIR INCOME ASSESSED AT A FIGURE LOWER THAN THE RETURNED INCOME? TO THIS THE LEARNED AUTHORISED REPRESENTAT IVE HAD NO REPLY. THOUGH WE DO SYMPATHIZE WITH THE CASE OF THE ASSESSEES THE T RIBUNAL BEING AN APPELLATE AUTHORITY CANNOT SHUT ITS EYES TO THE ACT. THE FAC T REMAINS THAT IN THE APPLICATION BY M/S. SIEMENS LTD. BEFORE THE HON'BLE SETTLEMENT COMMISSION M/S. SIEMENS LTD. ITSELF HAS ACCEPTED THAT IN SOME CASES IT WAS RECEI VING BACK AMOUNTS FROM THE PERSONS TO WHOM PAYMENTS HAD BEEN MADE ALLEGEDLY IN THE FORM OF COMMISSION AFTER DEDUCTION OF 2.5%. THE ASSESSEES CASES BEFO RE US HAVE NOT BEEN ACCEPTED BY M/S. SIEMENS LTD. TO BE FALLING WITHIN THIS CATE GORY. IN FACT THE COMMISSION PAID TO THE ASSESSEES HEREIN HAS BEEN ADMITTED AS I NCOME BY M/S. SIEMENS LTD. ON ACCOUNT OF THE LACKING OF THE KNOWLEDGE INFRASTRUC TURE AND CAPACITY TO RENDER ANY SERVICES BY THE ASSESSEES TO M/S. SIEMENS LTD. THO UGH IT HAS BEEN NOTICED BY THE LEARNED CIT BEFORE THE HON'BLE SETTLEMENT COMMISSIO N THAT IN TWO OF THE SIX CASES AT CHENNAI IMMEDIATE WITHDRAWALS OF CASH WAS OBSERV ED FROM THE ACCOUNTS STILL AS LONG AS IT HAS NOT BEEN ADMITTED BY M/S. SIEMENS LT D. OR PROVED THAT THE MONEY I.T.A. NOS.1140 1141 & 1311-1316/MDS/2009 9 HAS BEEN RETURNED TO M/S. SIEMENS OR THAT THE MONEY HAS BEEN EXPENDED AS PER THE DIRECTIONS OF M/S. SIEMENS LTD. THE CASE OF TH E PRESENT ASSESSEES CANNOT BE SHIFTED TO THE FIRST CATEGORY ADMITTED BY M/S. SIEM ENS LTD. IN THE CASE OF THE ASSESSEES HEREIN IT IS NOTICED THAT THE DISCLOSURE MADE BY M/S. SIEMENS LTD. IS ON ACCOUNT OF THE UNSUBSTANTIABLE PAYMENTS MADE BY M/S . SIEMENS LTD. THE DISALLOWANCE OR SURRENDER OF AN UNSUBTANTIABLE AMOU NT BY ONE ASSESSEE WOULD NOT MAKE THE MONEY RECEIVED BY THE RECIPIENTS AS NOT TH E RECIPIENTS INCOME. 8. COMING TO THE ISSUE OF THE DEBATABLE OR MISTAKE APPARENT FROM THE RECORD ISSUE IT IS NOTICED THAT THE INCOME OFFERED BY M/S . SIEMENS LTD. BEFORE THE HON'BLE SETTLEMENT COMMISSION IS ON ACCOUNT OF THE UNSUBSTA NTIABLE NATURE OF THE COMMISSION PAYMENTS BY M/S. SIEMENS LTD. AND NOT ON ACCOUNT OF THE RECEIVING BACK OF THE AMOUNTS PAID TO THE ASSESSEES. IT IS F OR THE ASSESSEES TO PROVE THAT THE MONIES RECEIVED BY THEM HAVE BEEN RETURNED TO M/S. SIEMENS LTD. IN SOME MANNER OR THE OTHER DIRECTLY OR INDIRECTLY AND THIS MOVE S THE ISSUE OUT OF THE REALM OF A MISTAKE APPARENT FROM THE RECORD INTO A HIGHLY DEBA TABLE ISSUE. IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE FINDING O F THE LEARNED CIT(A) ON BOTH THE ISSUES OF RECTIFICATION U/S. 154 AS ALSO ON MERITS IS ERRONEOUS. IN THE CIRCUMSTANCES THE FINDINGS OF THE LEARNED CIT(A) ARE REVERSED AND THAT OF THE ASSESSING OFFICER RESTORED. HERE WE MAY ALSO MENTION IN THE PASSING THAT IN THE CASE OF SHRI DURGA DAS VYAS ALL THE ASSESSMENTS ARE PROTECTIVE ASSESSM ENTS. THEY ARE NOT SUBSTANTIVE ASSESSMENTS. THE ASSESSMENT ORDER IS ALSO SILENT I N REGARD TO THE HAND IN WHICH I.T.A. NOS.1140 1141 & 1311-1316/MDS/2009 10 THE SUBSTANTIVE ASSESSMENT HAS BEEN MADE. IN THE C IRCUMSTANCES THE APPEALS OF THE REVENUE ARE ALLOWED. 9. THE ORDER WAS PRONOUNCED IN THE COURT ON 14/11/1 1. SD/- SD/- (DR. O. K. NARAYANAN) (GEORGE MATHAN) VICE PRESIDENT JUDICIAL MEMBER CHENNAI DATED THE 14 TH NOVEMBER 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE